Cash-strapped Air India continues to do charity

Air India's steep fare cut is great news for senior citizens, but is it good business sense?

Cash-strapped Air India continues to do charity
Air India continues its offerings to its customers. Image courtesy: Wikimedia Commons/Aeroprints.com

The cash-strapped privatisation-bound national carrier Air India continues its merry flight on the path of charity! The airline has announced that senior citizens can avail of its services at about half the cost. Though this is fantastic news for the flyers, especially with the year-end festivities just around the corner, the debt-ridden and loss-making airline would have been ill-advised to do so.  

According to the Air India website, an Indian citizen, residing in the country, and who has attained 60 years on the date of the journey would be eligible for this special discount. This concession, however, is available only for domestic travel, and the tickets have to be bought at least three days before the scheduled departure. Another condition attached to the offer is that the ticket would be valid for a year from the date of issue. 

Also importantly, the discount of 50% would be available on the basic fare on select booking classes in the economy cabin. According to the Directorate General of Civil Aviation (DGCA), an airfare also includes charges like airline fuel charge, common user terminal fee, passenger service fees, airport and/or user development fee and taxes, and any other applicable convenience charges. These would mean that the fare that senior citizens would now have to pay would not be exactly halved, but still this is a significant discount.  

Air India offers a plethora of discounts. Image courtesy: Twitter/@IndiainThailand

Passengers willing to take the benefit of this offer would have to furnish valid photo identity documents with date of birth, for instance, voter’s ID card, passport, driving licence, senior citizen ID card issued by Air India and so on. 

Also read: Why Air India failed to sell twice before and what's working now

"In case the relevant ID/documents are not presented at the time of check-in or at the boarding gate, the basic fare will be forfeited and the tickets will become non-refundable (only taxes and levies will be refunded). Boarding will be denied if the identity proof is not provided at the time of check-in and at the boarding gate," the Air India website mentions.

There would not be any discount for children travelling along, but the first travelling infant (under two years of age) would get a discount. 

This offer is available on the flights operated by Air India and on Alliance Air codeshare flights, and not on regional connectivity Alliance Air codeshare flights and Air India Express codeshare domestic flights. 

Apart from senior citizen discounts, Air India offers a whole bouquet of other concessions, including those for armed forces personnel, gallantry award winners, students, certain categories of differently-abled people, and even Arjuna awardees. 

Even if only senior citizen discounts are considered, none of the other major airlines in India offer such steep cuts. Market-leader IndiGo offers a concession of just six per cent on base fare for senior citizens on domestic flights. Another low-cost carrier SpiceJet also offers a discount of up to six per cent on base fare for domestic travel.

Also read: Why is Tata so keen to buy national carrier Air India?

GoAir, however, offers a bit extra. It gives senior citizens a concession of eight per cent on base fare on both domestic and international flights.

Air India's full-service competitor Vistara offers a senior citizen discount of 10% on the base fare for bookings made in India. 

Air India had not made profits since its controversial merger with Indian Airlines in 2007. 

Air India and Air India Express' total debt burden was Rs 60,074 crore as on March 31, 2019. The total liabilities of the two companies combined was Rs 56,084.3 crore in 2018-19. This meant that the total debt plus liability burden of Air India and its low-cost subsidiary Air India Express ran past Rs 1,00,000 crore in 2018-19. According to various media reports, the national carrier made a loss of Rs 8,556.35 crore in 2018-19.

Civil aviation minister Hardeep Sigh Puri had stated in September this year that the national carrier incurred a net loss of about Rs 2,570 crore in the first quarter of 2020-21, PTI reported. According to Air India's Chairman and Managing Director Rajiv Bansal, the airline could record a loss of Rs 8,000 crore this fiscal itself. 

According to a recent RTI response by Air India, there were outstanding dues of over Rs 822 crore towards VVIP charter flights as on November 30, 2019. Rs 9.67 crore towards evacuation operations and Rs 12.65 crore towards transporting foreign dignitaries were also pending. Alarmingly, Rs 526.16 crore was due to the airline on account of tickets taken on credit by government officials as on March 31, 2019. These factors, apart from high interest rates, fluctuating exchange rates due to a weakening rupee and competition from low-cost carriers have put a burden on the airline's finances.

After two failed attempts, Air India may finally be privatised. Image courtesy: Facebook/Air India 

Late last year, the airline announced that it would stop issuing tickets on credit to officials from government agencies like the Central Bureau of Investigation, Enforcement Directorate, Information Bureau, Central Labour Institute, Border Security Force and Indian Audit Board, each of whom owes the airline more than Rs 10 lakh, IANS reported.

Also read -- Air India sale: Here's the dark horse that can turn the contest on its head

Keeping these facts in mind, more concessions and discounts don't seem plausible. However, being the national carrier, one can understand that Air India is also imbued with the government's welfare approach.

But this approach has often caused a lot of harm to the airline, which can't step away from a money-making mindset if it has to stay in business and survive in the Indian aviation market that is marked by cut-throat competition. It is perhaps this reason that Air India could not ignore the commercial angle while attempting repatriations under the Vande Bharat Mission to save people stranded in various parts of the world in the wake of the Covid-19 pandemic.

According to the government, the national carrier had got "multiple expressions of interest" on December 14 as the government tries its utmost to sell the airline. After two failed attempts -- in 2000 and 2018 -- the government has again put Air India on the block, this time with a much-sweetened deal.

The government has agreed to offload 100% of its stakes in Air India and its low-cost arm Air India Express and its entire 50% stake the ground-handling unit AISATS. The government has also allowed bids on enterprise value, instead of the equity value of the airline, giving potential investors the flexibility to absorb the amount of the airline's debt that they want. 

India's largest conglomerate Tata group, which had founded Air India before independence, is reportedly involved in the bidding this time around, and so are SpiceJet and the US-based fund Interups Inc. A consortium of Air India employees led by the airline's commercial director Meenakshi Mallik is also trying to take over the ailing airline.

(Cover image courtesy: Wikimedia Commons/Aeroprints.com)